finance formulas

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four profitability ratios

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Finance

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11 Terms

1

four profitability ratios

gross profit margin mark up net profit margin return on capital employed

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2

ratio: gross profit margin

gross profit/revenue x 100

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3

ratio: markup

gross profit/cost of sales x 100

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4

ratio net profit margin

net profit/ revenue x 100

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5

interfirm

between different firms, for example, comparing the performance of two different house builders

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6

intrafirm

within the firm, for example, comparing this year's results with last year's, or the performance of the Leicester branch of a retail store.

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7

Stakeholder

anyone with an interest in the activities of a business, whether directly or indirectly involved.

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8

return on capital employed ROCE

net profit before interest and tax/ capital employed x 100

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9

measuring liquidity

liquidity ratio measures how solvent a business is

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10

Types of liquidity ratio

current ratio acid test ratio/ liquidity ratio (liquid cap)

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11

current ratio

current assets/ current liabilities

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